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Teachers Mutual cuts rates by up to 31 basis points

Teachers Mutual cuts rates by up to 31 basis points

Teachers Mutual Bank has cut its interest rates for owner-occupiers who take out new home loans and fix their rates.

Borrowers must also have a maximum loan-to-value ratio (LVR) of 80 per cent and opt for principal-and-interest repayments if they want to qualify for the lower fixed rates.

The new rates are:

  • 3.79 per cent for one-year fixed rates
  • 3.84 per cent for two-year fixed rates
  • 3.99 per cent for three-year fixed rates

The changes took effect on 17 August, and also apply to UniBank and Firefighters Mutual Bank, which are subsidiaries of Teachers Mutual.

Teachers Mutual undercutting the market

Teachers Mutual’s new rates are below the market average, according to an analysis of all the owner-occupier fixed-rate products on RateCity on 31 July.

The market averages are:

  • 4.23 per cent for one-year fixed rates
  • 4.18 per cent for two-year fixed rates
  • 4.23 per cent for three-year fixed rates

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Learn more about home loans

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

What are the different types of home loan interest rates?

A home loan interest rate is used to calculate how much you’ll pay the lender, usually annually, above the amount you borrow. It’s what the lenders charge you for them lending you money and will impact the total amount you’ll pay over the life of your home loan. 

Having understood what are home loan rates in general, here are the two types you usually have with a home loan:

Fixed rates

These interest rates remain constant for a specific period and are a good option if you’re a first-time buyer or if you’re looking for a fixed monthly repayment. One possible downside of a fixed rate is that it may be higher than a variable rate. Also, you don’t benefit from any lowering of interest rates in the market. On the flip side, if rates go up, your rate won’t change, possibly saving you money.

Variable rates

With variable interest rates, the lender can change them at any time. This change can be based on economic conditions or other reasons. Changes in interest rates could be beneficial if your monthly repayment decreases but can be a problem if it increases. Variable interest rates offer several other benefits often not available with fixed rate home loans like redraw and offset facilities and free extra repayments. 

What is the difference between fixed, variable and split rates?

Fixed rate

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

Variable rate

A variable rate home loan is one where the interest rate can and will change over the course of your loan. The rate is determined by your lender, not the Reserve Bank of Australia, so while the cash rate might go down, your bank may decide not to follow suit, although they do broadly follow market conditions. One of the upsides of variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts.

Split rates home loans

A split loan lets you fix a portion of your loan, and leave the remainder on a variable rate so you get a bet each way on fixed and variable rates. A split loan is a good option for someone who wants the peace of mind that regular repayments can provide but still wants to retain some of the additional features variable loans typically provide such as an offset account. Of course, with most things in life, split loans are still a trade-off. If the variable rate goes down, for example, the lower interest rates will only apply to the section that you didn’t fix.

What is the difference between a fixed rate and variable rate?

A variable rate can fluctuate over the life of a loan as determined by your lender. While the rate is broadly reflective of market conditions, including the Reserve Bank’s cash rate, it is by no means the sole determining factor in your bank’s decision-making process.

A fixed rate is one which is set for a period of time, regardless of market fluctuations. Fixed rates can be as short as one year or as long as 15 years however after this time it will revert to a variable rate, unless you negotiate with your bank to enter into another fixed term agreement

Variable rates is that they are typically more flexible than their fixed rate counterparts which means that a lot of these products will let you make extra repayments and offer features such as offset accounts however fixed rates do offer customers a level of security by knowing exactly how much they need to set aside each month.

How to apply for ANZ home loan during maternity leave?

Qualifying for an ANZ home loan while you’re on maternity leave may require some research.

Much like other home loan applications, you'll need to be able to show the lenders that you’ll be able to pay the mortgage instalments on time, even during maternity leave, which can improve  chances of your home loan being approved. Your chances improve if you have savings, home equity, or if you receive any government-related benefits.

You’ll likely need  to provide no less than three payslips you received before the start of your maternity leave and a letter from your employer, with the letter stating the maternity leave terms such as the date on which you’ll return to work and the kind of employment (full-time, part-time, or casual) when you resume.

Your lender will likely consider the tenure of your maternity leave while assessing your loan application. Lenders also prefer if you are paid while on maternity leave; however, you may receive only half your salary, so the lender may not consider your regular income to determine the loan amount.

How long does ANZ take to approve a home loan?

The process of applying for a home loan usually stays the same across all lenders. On the other hand, the time it takes for a lender to approve the home loan differs from lender to lender. When it comes to ANZ, it takes anywhere between 15 to 18 business days to approve a home loan from the day of the application to approval. This timeframe is highly dependent on the credibility and availability of your documentation. You can apply for an ANZ home loan in two ways; a Quick Start home loan application or a full online application.

If you opt for the Quick Start home loan option, you’ll need to fill out a form with basic details. During this stage, you don’t need to add any supporting information. An ANZ representative will then call you within 48 hours. The representative will help take your application forward, including assessing all relevant information, documentation and conducting a credit check.

You can also submit your entire home loan application with ANZ online by filling out a comprehensive form with all the information and documentation needed.

Once ANZ has conducted the preliminary checks, you’ll be informed of the pre-approved amount they’re willing to offer. Based on this amount, you can set a budget for your property search and make sure you stay inside your budget. Pre-approval will last for three months but can be extended by applying with ANZ if you don’t find a property. But it’s best to find a property as soon as possible as ANZ may decide to change the amount if your financial situation changes.

After you find a property and have your offer accepted, ANZ may send an assessor to the property to verify it’s value. If everything is per their terms and conditions, ANZ will finalise your home loan’s approval and release the funds.

Can I get a home loan if I owe taxes?

Owing money to the Australian Tax Office is not an ideal situation, but it doesn’t mean you cannot qualify for a home loan. Lenders will take into account your tax debt, your history of repaying the debt and your other financial circumstances, while reviewing your home loan application. 

While some banks may not look favourably upon your debt to the ATO, some non-bank lenders may be willing to help. They will look into the reasons for your tax debt and also take into account the steps you have taken to repay it before deciding whether to offer you the loan or not. Having said that, there are no guarantees - it depends on your whole financial picture.

Here are a few steps that you can take to improve your chances of getting approved for a home loan.

  • Demonstrate evidence of income.
  • Manage your debt by paying it off in installments.
  • Offer an explanation for your tax debt and a plan to pay it off.
  • Do what you can to stay out of court or attract debt collection agencies.

 

Can I get a Commonwealth Bank home loan during maternity leave?

The Commonwealth Bank considers several factors like your income, expenses, assets, and liabilities to determine whether you’re suitable for a loan. Being on maternity leave doesn’t mean you won’t get approved for a loan, provided you meet the lender’s other criteria. For example, you may have other savings or spousal income to support your application. 

Having said that, it can be slightly more difficult to get a loan while you’re on maternity leave if you’re not being paid for your time off (which is often the case, depending on how long it’s for). 

If you are looking to apply for a Commonwealth Bank home loan during maternity leave, here are some things that may help your application:

  • Get a letter from your employer including details like your date of resuming work, salary when you return to work, and other employment terms
  • Show the bank you have savings. Putting up a 20 per cent deposit may help and you could also avoid Lenders Mortgage Insurance (LMI)
  • Calculate your income and expenses to apply for only what you can afford to pay.
  • If you have a partner or guarantor to help with your loan, provide their financial details on your application. 

Some people like to tell the lender they are on maternity leave before applying to see whether they qualify before going through the full process. 

How does a mortgage calculator work?

A mortgage calculator is an extremely helpful tool when planning to take out a home loan and working out the costs. Although each mortgage calculator you come across may be slightly different, most will help you estimate how much your repayments will be. The calculator will often also show you the difference in repayments if you repay weekly, monthly or fortnightly. 

To calculate these figures, you’ll be asked to enter a few details. These include the amount you plan to borrow, whether you’re an owner-occupier or an investor, the proposed interest rate and the home loan term. It will also often show you the total interest you’ll be charged and the total amount you’ll repay over the life of the loan.  

Understanding how the mortgage calculator works, helps you to use it to see how different loan amounts, interest rates and terms affect your repayments. This can then help you choose a home loan that you can repay comfortably and save on interest costs. The mortgage calculator lets you compare the benefits and costs of home loans from different lenders to help you make a more informed choice. Use a mortgage calculator to help identify which home loan is most suitable for your requirements and financial situation.

How do I apply for a home improvement loan?

When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying. 

Besides taking out a home improvement loan, you could also:

  1. Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement.  Speak with your lender or a mortgage broker about accessing your equity.
  2. Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
  3. Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
  4. Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.